Buy custom Why Prices Often Show Less Variation Under Oligopoly Than Under Other Types Of Market Structure
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Business
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Also in this graph marginal revenue curve MRa - MRb has a discontinuity at the quantity point of the kink. Marginal cost curve crosses marginal revenue curve somewhere at a discontinuity between points QR, though this does not mean that a kink occurs at a point when MR=MC.
Fig. 1 Kinked demand curve...
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1 Kinked demand curve. R.L. Hall and C.J. Hitch, “Price Theory and Business Behavior,†Oxford Economic Papers, no. 2 (May 1939): 17
Kinked demand curve is one of the reasons why oligopolies keep their prices more stable though it is not a sole reason. One of the other explanations might be so called menu costs, the price of changing the cost of a product, e...
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